Must-read: Nick Bunker: “Abundance and the Direction of Technological Growth”

Must-Read: Cf. the debate about North Atlantic technological development in the nineteenth century started by the most amazingly-named Sir Hrothgar John Habakkuk, or, indeed Robert Allen’s The British Industrial Revolution in Global Perspective. Most new technologies will not–at least not initially–involve movements of the PPF up and to the right, but rather the creation of new techniques that fall, relative to current ones, in quadrants II and IV. Whether those are profitable will turn very heavily on what current factor prices and factor availabilities are:

Nick Bunker: Abundance and the Direction of Technological Growth: “In a piece from two years ago, Ryan Avent of The Economist fleshes out a deeper argument…

…that in incentivizing work from low-wage workers, wages remain low and reduces the incentive to innovate. If these workers were able to live without earning wages from work, wages might rise and spark labor-saving innovation. Jared Bernstein of the Center on Budget and Policy Priorities floats the idea that during periods of full employment, when the labor market and the economy as a whole use labor and capital to their capacity, productivity can be boosted as companies innovate in response to higher wages.

These arguments are similar to the idea of directed technical change…. The relative prices of the factors of production affect the kind of innovation and productivity growth in an economy…